More petrol price pain on the horizon

Motorists can expect another hike in the petrol price in June if global oil prices and rand volatility keep on the current path.

Consumers are still reeling from a 50 cents hike in the fuel price at the start of May, but the hike was about half of what it would have been if the department of energy had taken its adjustment data a day later.

According to the Central Energy Fund, by the end of April, the under recovery in the petrol price was sitting close to R1.00 per litre of petrol – a price point which was driven by the climbing global oil price, and the much weaker rand during the past week.

Entering into May, these trends have not abated, with the current under recovery sitting at close to 80 cents a litre.

On the oil front, it has been a bad start to the week, with the global oil price reaching its highest point since 2014 on Monday, before pulling back slightly on Tuesday. The oil price is currently around $70 a barrel.

According to analysis by Bloomberg, oil price volatility is being spurred by speculation around US president Donald Trump’s position on Iran – whether or not he will pull out of a 2015 deal with the oil-producing country and impose more sanctions on it.

Analysts are split, with some predicting that the split will happen, while others believe the US will stay committed, and sign side-deals with other countries to get what it wants.

On the rand, things look slightly worse for South Africa’s petrol prices.

The review which pushed the petrol price up by 50 cents saw the average rand/US Dollar exchange rate for the period move up to R11.99 from R11.85 before. The currency has weakened significantly more since then.

By 09h00 on Tuesday, the rand was trading at R12.51 against the US dollar, with its weakened position driven by the strengthening US unit.

The dollar climbed back towards its highest level of 2018 on Monday with more investors going long as the probability of a rate hike by the Federal Reserve shifted to near certain, diminishing the appeal of high-yield currencies such as the rand, Reuters reported.

Lower global prices for gold, one of South Africa’s key exports and sources of foreign currency, also weighed on the rand, it said.

Speaking on the May petrol price increase at the end of April, the Automobile Association said that if the rand doesn’t appreciate significantly against the US dollar – and if international oil prices don’t decrease – an increase in the petrol price June is unavoidable.

Read: Here is the official petrol price for May 2018

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More petrol price pain on the horizon